The next morning, the fanatics apparently sent back a message: in Istanbul, truck bombs blew up outside the British Consulate, a massive relic of the old empire (designed by Sir Charles Barry, the architect of the Houses of Parliament in London), and an 18-story tower housing a British bank, killing at least 27 and wounding 450. In London, the suicide attacks effectively drowned out the noise of anti-Bush demonstrators. WILL BRITAIN BE HIT NEXT? shouted London’s Daily Mail. In Washington, too, alarm bells began to ring.

At the joint FBI-CIA-run Terrorist Threat Integration Center, the analysts thought they detected a pattern. The attacks against the British targets in Turkey came five days after the truck bombings of two popular synagogues in Istanbul and two weeks after carefully orchestrated suicide attacks in Saudi Arabia. The “chatter”–loose talk of threats among Islamic extremists, picked up by U.S. eavesdroppers–was spiking upward again. The traditional holiday of Ramadan, propitious in terrorist minds for great and violent events, was coming to an end. “You have rapid-fire, back-to-back significant Al Qaeda attacks,” one counterterrorism official told NEWSWEEK. “It’s starting to look like this could be the buildup to a grand finale on U.S. soil.”

Or not. After so many false alarms, the top intelligence officials were careful to hedge. On Friday night, FBI Director Robert Mueller called police chiefs in Washington, New York and Los Angeles, while Homeland Security Director Tom Ridge called the mayors. “We’re asking you to go to a higher state of alert,” said Mueller. But the Feds shied away from raising the national threat level to Orange (high), for fear of crying wolf.

So the puzzle persists. More than two years after 9/11, Al Qaeda continues to hit “soft targets,” mostly in the Islamic world (Turkey, Morocco, Tunisia, Indonesia, Pakistan, Yemen, Kenya, Chechnya, Saudi Arabia). But–so far–not London or Paris or New York or Washington. Is Al Qaeda, with its very long view of history, biding its time, working up slowly toward another “spectacular”? Or has the Qaeda leadership been shattered, leaving its scattered followers to attack where they can?

For all the spy satellites and high-tech listening devices that can home in on the terrorists’ chatter, and despite enormous increases in the “black budget” spent on intelligence-gathering in the war on terror, the true threat to the American homeland remains murky. In part, the intelligence community has spread itself thin trying to wage war in Iraq while tracking down Al Qaeda around the world. But the real problem is that small cells of fanatics tied by religion and blood are difficult to penetrate, especially for Western spies.

How weak is U.S. intelligence? Consider Iraq, dubbed the “central front” in the war on terror by President Bush. Knowledgeable officials tell NEWSWEEK that they have no idea who was behind the deadliest bombings in Iraq since early last summer–the suicide attacks in August on the Jordanian Embassy and the U.N. headquarters in Baghdad, the bombing that killed a prominent Shiite ayatollah in the holy city of Najaf and the recent attacks on Italian forces in Nasiriya and a simultaneous wave of car bombings in Baghdad. There are no clear culprits.

Last week President Bush and Prime Minister Tony Blair went to some lengths to tie the attacks in Turkey to the continued violence in Iraq. “What this latest outrage has shown us is this is a war,” Blair said at a grimly defiant press conference held in the wake of the Istanbul bombings. “Its main battleground is Iraq.” Yet the U.S. intelligence community increasingly regards the Iraqi violence as a classic insurgency, a guerrilla war run by holdovers from the Saddam regime with marginal help from Islamic fanatics. Some intelligence officials say the groundwork had been laid by a secret, compartmented unit of Iraqi intelligence known as M-14, which stored huge arms caches (and Palestinian-style suicide vests) around Iraq for years before the American invasion. Bands of loyalist militia, or fedayeen, are running the insurrection, possibly with some central coordination (though not from Saddam, who is said to be preoccupied with saving his own skin).

Islamic extremists do play at least bit parts. Throughout the Islamic world, jihadi Web sites are festooned with recruiting pitches for volunteers to drive the American infidels from Iraq. One site advertises a “University of Jihad,” whose students presumably graduate to martyrdom. But American intelligence officials suspect that the jihadis in Iraq are mostly cannon fodder for Saddam’s holdouts, not a true independent force. And American commanders concede they have yet to capture a confirmed Qaeda operative.

It’s difficult to know where or how Osama bin Laden fits in. According to reports from the lawless mountains along the border between Afghanistan and Pakistan, bin Laden has ordered some Qaeda operatives to head for Iraq. The Qaeda chieftain is said to be so pleased with the chaos in Iraq that he wishes to add to it any way he can. In Afghanistan, Islamic extremists are reportedly unhappy about bin Laden’s decision, fearing that it will siphon badly needed resources away from the resurgent Taliban and other anti-U.S. forces.

But does bin Laden still call the shots? In its pre-9/11 heyday, Al Qaeda was a centrally organized network complete with a charismatic leader (bin Laden), effective lieutenants (Ayman Al-Zawahiri, Khalid Shaikh Mohammed, Abu Zubaydah), a large and secure home base (Afghanistan), an elaborate financing structure (Saudi-funded international Islamic charities) and a system of elaborate paramilitary training camps. Today, Qaeda leaders are mostly either dead, captured or in deep hiding. The CIA seems to believe that bin Laden and Al-Zawahiri are either on the Afghan-Pakistani border or in a teeming Pakistani city like Karachi, while some Pentagon officials are intrigued by hints that bin Laden and Al-Zawahiri may be hiding in Iran. Last week Marine Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, told reporters that “bin Laden has taken himself out of the picture.” But some of his lieutenants are still believed to be at large and operational. The CIA and a host of other intelligence services are on the lookout for Abu Mussab al-Zarqawi, a poisons expert with ties to bin Laden and, the Bush administration has claimed, Saddam Hussein.

U.S. officials can’t seem to decide whether the war in Iraq is helping or hurting the overall war on terror. It has long been a dream of many in the Bush administration, especially the neoconservatives in the Pentagon centered on Deputy Defense Secretary Paul Wolfowitz, that a democratized Iraq will be both a beacon and a base in the fight against radical Islam. But some senior officials worry, though usually not out loud, that the war could backfire. A leaked memo from Defense Secretary Donald Rumsfeld pointedly asked whether Islamic religious schools, fueled by anti-Western rage, are creating terrorists faster than American soldiers can kill or capture them.

Although the administration likes to say that the war in Iraq and the war on terror are inseparable, the former has almost certainly diverted resources from the latter. Arabic translators, always in short supply, are in demand to interrogate Iraqi prisoners and help American soldiers talk to the locals. Meanwhile, in Washington, transcripts of electronic intercepts of possible terrorist conversations pile up, unread and untranslated for weeks. Similarly, many Special Operations soldiers who had been chasing through the mountains of Afghanistan looking for bin Laden and his followers were shifted over to Iraq to spend months fruitlessly searching for weapons of mass destruction.

Administration officials insist that they have not been robbing Peter to pay Paul in the war on terror. Much of what the CIA knows about Al Qaeda and other Islamic extremists comes from other intelligence services. The Egyptians or Jordanians are much more likely to get inside an Islamic terror network than the Americans. Countries that don’t always observe democratic niceties sometimes have more effective interrogation methods (the Egyptians have been known to closely question a suspect’s family members). The CIA has a pipeline, lubricated by large amounts of cash, to the secret police in various Middle Eastern countries.

Still, the war in Iraq has not helped foster these special relationships. The security services of Middle Eastern despots are not enthusiastic about promises of democratic change coming from Bush, who made clear in his speech last week in England that America would push even its allies to become more democratic. After 9/11, Syrian intelligence began working with the CIA against a common enemy, the Syrian Muslim Brotherhood, which wanted to both overthrow the Assad regime and help Al Qaeda attack the United States. But, intelligence sources tell NEWSWEEK, the neocons in the Pentagon have been undermining that relationship by accusing (without much proof) the Syrians of encouraging jihadists to cross into Iraq and of hiding Saddam’s WMD inside Syria.

So far, Turkey has been America’s most constant public ally among Muslim nations in the Middle East. Turkey is a bridge to the West, with strong economic and military ties to Europe and the United States. It has long been the most secular of Islamic countries and the friendliest toward Israel. All of which marks Turkey as a target for extremists. Last week a Qaeda Web site challenged Turkey to leave behind the “Crusaders” and rejoin Islam.

The responsibility for the suicide bombings was claimed by a Turkish radical fringe group called the Islamic Eastern Raiders’ Front (IBDA-C). Driven underground by Turkey’s violent repression of Islamic fanaticism in the ’90s, some Turkish extremists showed up in Qaeda terrorist-training camps in Afghanistan or joined the jihad in Chechnya or Bosnia. Just before they self-immolated, two of the Istanbul bombers had flown to Dubai, a crossroads in the Gulf sometimes used by terrorist planners, including the ones who staged 9/11. Did the Turks receive money, weapons and instruction from some higher authority? Ayman Al-Zawahiri, Al Qaeda’s brainy number two, has written that jihadists should go after softer, smaller targets if the big ones are too hard to hit. Al-Zawahiri has also counseled patience. True holy warriors measure time by the century.